sinovels Chapter 112 Refinancing
Chapter 112 Refinancing
Chapter 112 Refinancing
Ernst did not tell Sergey Brin that Goldman Sachs had already contacted him.
Using Google's second round of funding as leverage to secure Wall Street capital's non-interference in Google's internal operations, Ernst said he needed time to consider, which was essentially a delaying tactic.
He has plenty of ways to keep Google under his control. Even without a second round of financing, he can still control Wall Street by getting them on the board.
But the situation is different now. Wall Street's push has caused Google's market value to surge again, and the GG profit model that Ernst and others have set up for Google is not yet ready to be unveiled.
"How long do you think it will take before our Normandy landings can be carried out?"
After a moment's thought, Sergei Brin gave a cautious reply: "Three to six months."
Pointing to the newspaper on the table, he said, "Netscape wouldn't have lasted this long originally, but things have changed after Wall Street's actions. The market value of internet companies will definitely increase, and Netscape's market value will also grow in a short period of time."
The Normandy landings were Google's plan to blitz Internet Explorer.
When Netscape Navigator's financial problems began to show signs of failure in the market, Google quickly launched its own browser, leveraging the user base accumulated through its search engine to achieve a market blitzkrieg and break Microsoft's attempt to monopolize the browser market.
With Google and Microsoft reaching an agreement, Google began putting pressure on Netscape regarding payment options.
A usage fee of one million US dollars per year?
Yes, there is such a contract agreement.
But I didn't say there were no other fees.
Google's subsequent list of charges prompted Netscape's CEO to publicly lash out in the media.
A basic service fee of $50,000 per month isn't much, is it? A quarterly upgrade and maintenance fee of $200,000 isn't much either, is it?
However, Netscape's defenses crumbled when it came to collecting fees.
Technical guidance fees are calculated by the hour, data storage expansion fees are charged by the byte, and even the number of API calls is charged separately.
These suddenly appearing expenses snowballed, causing Netscape's annual cost of using Google's search engine to soar from one million dollars to twelve million seven hundred thousand dollars.
Netscape is now in a dilemma. Continuing to use Google's search engine means that its annual operating costs will increase more than tenfold, causing a large portion of its profits to be handed over to Google.
Moreover, the supply contract signed between Google and Netscape originally had a tiered growth model, with the price increasing by 30% in the second year according to the agreement.
This is also why Netscape's CEO publicly criticized Google and Ernst; clearly, Netscape was tricked by Google.
At the time, they thought it was just an annual increase in usage fees, and that there was no difference between one million US dollars and one million three hundred thousand US dollars.
But now it seems that other costs will definitely rise as well, and Netscape is no different from a slow death.
Abandoning Google's search engine? Netscape's management knows better than anyone the fatal risks behind this choice.
According to data from Netscape's internal survey, if a browser were to switch search engine providers, its user retention rate would drop by about 63% within three months, which would mean that its market share could be halved within a quarter.
Netscape's main revenue isn't Google, but paid memberships. With a sharp drop in users, it will die even faster, and may go bankrupt at any moment.
Without Internet Explorer, Netscape wouldn't have faced much pressure regarding the usage fee of over ten million dollars.
But now IE has also reached a usage agreement with Google, and IE is still free, which is a huge blow to Netscape.
Microsoft is a large and powerful company. The Windows system alone brings it more than two billion US dollars in net profit every year, so it has the confidence to seize the market through a free strategy.
But Netscape is different. Every additional cost it incurs is like adding weight to an already shaky scale, pushing the company one step closer to the edge of a precipice.
So Netscape was bound to die; it was just a matter of sooner or later.
However, Google cannot allow Internet Explorer to monopolize the entire browser market after Netscape collapses. The moment Netscape falls will be the moment Google Chrome is released.
This was the Normandy landings.
Once Google releases its own browser to directly compete with Microsoft, securing a continuous supply of resources will become crucial.
At that time, Google will fully launch its profit model.
But now Netscape will definitely be given a much-needed reprieve, and Google will also need a lot of funding for its development in the coming period.
Ernst was prepared to go with the flow and agree to Wall Street's request for Google to proceed with its second round of funding.
"How's the search for a new office address going?" Ernst changed the subject.
Google needs money, and there are many other places to go, such as building a new headquarters.
Google is no longer a small company; it now has nearly 500 employees.
The current office building is no longer usable. The expansion of the data center, the increase in staff, the expansion of various entertainment rooms, canteens and other logistical facilities, as well as the parking problem, are all forcing Google to solve the office space problem as soon as possible.
At this point, Google had reached a point where it had no choice but to relocate.
Ernst met with Google executives and decided to move away from leasing offices and instead acquire land to build Google's own headquarters.
Building its own headquarters can turn it into a company asset, and also, Google's need for space is growing at an alarming rate.
Once Google Chrome is launched and a monetization model is introduced, a large number of staff will be needed for development and maintenance.
The expansion of departments such as finance, marketing, legal affairs, and human resources, and the subsequent establishment of various new departments, etc.
Even more challenging is the issue of data center expansion. With search requests growing at a rate of 19% per month, the existing server clusters have repeatedly issued overload warnings.
Adding servers will become a regular occurrence for Google in the future; they can't just relocate headquarters again, can they? That would be too much trouble.
The reason why Google's projected losses for this year are so large, as obtained by Wall Street, is because Google has spent a lot of money acquiring land to build its headquarters.
"We have reached a basic agreement with the Mountain View City Council. The council has been very proactive in keeping Google in Mountain View and has agreed to allocate about six acres of land for us in Charleston at a very low price."
"Moreover, there is a lot of land there, which will make it convenient for us to expand in the future."
Ernst frowned; more land meant more emptiness.
"What about the infrastructure? Can it keep up?"
Sergey Brin reassured Ernst, "In fact, we got a great deal. That land was originally intended for Synopsys. But obviously, Google has a higher standing on the city council, so the land was given to us first."
Synopsys, Ernst knew this company. It was a provider specializing in EDA software and semiconductor intellectual property rights. It had been established for ten years and was one of the earliest Internet companies.
The fact that Google was able to snatch the land from them is enough to show that Google's influence in Silicon Valley is now vastly different from what it used to be.
"Once the new headquarters is built, Google will need to be formally split up."
With the launch of Gmail, Google now has two major business segments: browser and email.
Google will develop more businesses in the future, and it will be necessary to split and integrate them. The businesses must be completely separated.
First, splitting up business units facilitates vertical management.
Each business line will have its own independent product, technology, and operations teams, shortening the decision-making chain by at least 50%.
The second is also a kind of power check and balance mechanism.
To avoid the risk of the entire company's business being paralyzed due to changes in a few key personnel, this risk is particularly prominent in technology companies.
The third purpose is to cultivate talent.
Take Marissa Mayer, for example; she is now the Marketing Director at Google.
If the existing structure is maintained, she will be responsible for the marketing of all business operations across the company.
If she were poached by a competitor, Google's marketing system wouldn't necessarily be paralyzed, but it would at least experience a period of chaos. This is a huge risk that must be avoided at all costs.
However, things are different once the various business units are separated. Marissa Mayer is merely the marketing director for Google's business unit and has no connection to the email business or any other business unit afterward.
Even if Marissa Mayer leaves, due to the business split, the marketing directors of other businesses can always take over Marissa Mayer's position and stabilize the situation.
"I'm really looking forward to this day." A hint of anticipation appeared on Sergei Brin's face.
Business restructuring not only involves organizational restructuring, but also touches on the sensitive issue of employee stock ownership plans.
If the empire were not divided up at that time, it would cause suspicion among many people.
After Google's first round of funding, Ernst deliberately suppressed the implementation of the equity distribution plan.
It wasn't that he was reluctant to part with it; rather, he wanted to wait until Google's IP0 was released before making a decision.
He believes that on the day Google IPOs, Google's market value will be a completely different one.
The same number of shares granted after an IPO versus now has a completely different psychological impact on employees.
Only then can equity incentives truly create a "golden handcuff effect," achieving long-term binding of core talent; many companies have done this.
But things are different now. Google's Series B funding round is confirmed to be its last, and it will definitely choose to go public via IPO afterward.
The surge in valuation during the Series B funding round can have the same effect.